Definition

Basing-point pricing

Basing-point pricing is a geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer.

Using basing-point pricing the seller selects a given city as a “basing point” and charges all customers the freight cost from that city to the customer location, regardless of the city from which the goods are actually shipped. For example, Peerless might set Chicago as the basing point and charge all customers $10,000 plus the freight from Chicago to their locations. This means that an Atlanta customer pays the freight cost from Chicago to Atlanta, even though the goods may be shipped from Atlanta. If all sellers used the same basing-point city, delivered prices would be the same for all customers, and price competition would be eliminated.